Supreme Court Gives Bayer Victory in Cipro Patent Fight

(MoneyWatch)  The U.S. Supreme Court rejected an appeal by a pension fund to end "pay for delay" payments from drug companies to generic makers. In the case, Arkansas Carpenter's Health and Welfare Fund sued Bayer alleging that Bayer's payment of $398 million to Teva/Barr in return for Barr's agreement not to market a generic of the antibiotic Cipro was anti-competitive. A federal appeals court found that the payments were within the law.

In some ways, the rejection is not surprising. Payments to companies challenging branded patents have occured for years. Previous courts have found that a company's patents give it the right to reach legal settlements with those attempting to breach them.

But law professor Christopher Holman raised an interesting question prior to the case being rejected on Patently-O, a patent law blog:

... why would a patent owner pay an alleged infringer to settle a lawsuit unless the merits of the patent case were weak?

... is it not logical to infer that the parties are using the patent lawsuit as a mere pretense to provide cover for what is in actuality an agreement between potential competitors not to compete?

Well, yes and no. As Bristol-Myers Squibb's Andrew Bodnar found recently when a judge ordered him to write a book about how he screwed up a patent deal on Plavix, there are about a million different ways that patent disputes can go wrong.

Paying a competitor to go away isn't always about limiting competition; sometimes it's just cheaper than engaging in months of legal uncertainty before finally proving that the patent challenge was, in fact, frivolous.

It's a shame that the Supremes didn't take the case -- I would have enjoyed their discussion on what portion of generic drug company challenges are threadbare blackmail attempts and what portion are legitimate challenges to drugs that have run their course.